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Test 3: Macroeconomic Challenges

Role of Government
The government is involved in the U.S. economy to promote and encourage competition, prevent monopolies that deny the public the benefits of competition, and regulate industries in which a monopoly is in the public interest.
Minimum Wage
The year 1968 had a minimum wage with more purchasing power than in any other year.
Characteristics of Money
Portability, durability, divisibility, stability of value
Currency
In order for currency to work and business to be conducted, the currency must be trusted and accepted.
Bond
Pay a fixed interest rate over a specified period of time.
Municipal Bond
Usually safe investments
New York Stock Exchange
Many stocks in the United States are traded on the famous NYSE
S & P
The S&P 500 rose above 300 and then dipped below itin 1985-1990
Treasury Note
A Treasury note matures in 10 years or less.
Business Cycle
The business cycle since World War II has been characterized by extended expansions alternating with brief recessions.
Cyclical Unemployment
Unemployment that is directly related to swings in the business cycle
Cost-Push Theory of Inflation
Inflation is caused by workers.
Great Depression
The stock market crash marked the beginning of the Great Depression in 1929
Structural Unemployment
Caused by changes in technology and changes in consumer tastes
Demand-Pull Theory of Inflation
Inflation is caused by consumers
Business Cycle Expansion
The Roaring Twenties can be characterized as a period of economic expansion.
Technological Unemployment
Caused by automation or replacement by machines
Employment Issues
A worker shortage is when the number of available workers shrinks to the point that employers grant inflationary wages to attract new employees.
Inflation
Inflation can sometimes be the result of a booming economy.
Aggregate Demand
Increases if consumers save less and spend more.
John Maynard Keynes
According to John Maynard Keynes’s theory of the multiplier-accelerator effect, a decline in investment spending will lead to a downward spiral of the economy.
John Maynard Keynes
Introduced his theories in 1936.
Consumer Price Index
Major economic indicator and can best be defined as a market basket of goods and services that tracks inflation from year to year
Recession
In the business cycle, the inevitable downturn after a period of economic growth
Labor Unions
add to the buying power of Americans by lifting workers into middle class, raise costs by lifting the wages of workers higher than supply and demand would suggest, and allow workers to bargain collectively to limit the harmful effects of worker competition
Financial Markets
Protect the wealth of an individual from threats like fire, theft, and inflation by loaning it to other people who will put it to work
Economic Growth
Consumer spending is responsible for 2/3 of economic growth.
Glass Ceiling
Invisible barrier that hinders women and minorities from advancement up the corporate ladder
GDP
Includes the value of a new house, the value of a new car, and the sale of an ice cream cone.
Traditional Theory of Wages
The theory that wages are based on the supply and demand for a worker’s skills
Trough
Trough
Inflation
A rise in the cost of goods and services
Deflation
A decline the cost of goods and services
Recession
A decline in GDP for 2 consecutive quarters
Depression
A severe economic downturn (phase 4 of the business cycle rarely gets this bad)

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